Coca-Cola Amatil warns of weak sentiment

cokeBeverage giant Coca-Cola Amatil said a warm autumn is helping business, but an eight-week federal election campaign is not.

Consumer sentiment has been subdued amid historically low wages growth, and the uncertainty created by an election only adds to the challenges for retailers, MD Alison Watkins said.

“There is a caution in the Australian consumer just around the very low and sometimes negative growth in household income, despite very low interest rates and despite relatively low petrol prices,” she said after Coca-Cola Amatil’s annual general meeting.

“There’s probably no doubt that an election and a prolonged election campaign doesn’t help either – it’s very common in most consumer businesses that that adds to uncertainty.”

But a positive for the maker and distributor of soft drinks, sports drinks, water and alcoholic beverages has been a run of wonderful weather in most parts of Australia over summer and autumn.

“Certainly weather is a factor in our business, and warm weather typically means more people out and about, with bigger thirst, so that’s a good thing for us,” Watkins said.

Despite the challenge posed by subdued consumer sentiment, as well as higher costs in its Indonesian business due to a weaker local currency, Coca-Cola Amatil is aiming to continue to improve its growth in EPS in 2016.

The pace of that growth will depend on the success of revenue initiatives in Australia, and economic factors in Indonesia, Watkins said.

She declined to comment on how the company’s sales and earnings were tracking in the first few months of the year.

Coca-Cola Amatil’s net profit rose 45 per cent in 2015 as earnings in its Australian beverages business stabilised after two years of sharp falls.

It continues to develop products to meet a growing preference for drinks with no added sugar and low calories, and in smaller portions.

It is already rolling out two water products that have been successful elsewhere in the world – Zico Coconut Water Chocolate and Smartwater, a vapour-distilled mineral water.

Effort has also gone into a revamp of packaging for the Mount Franklin water brand, and a range of “enhanced” water products including Smartwater, lightly sparkling and flavoured sparkling products, Watkins said.

Coca-Cola Amatil will also look at further developing its low calorie Coke Life brand, which was launched in Australia in 2015.

Naturally sweetened drinks are a huge priority for Coca-Cola Amatil’s parent, The Coca-Cola Company, she said.

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